Riverstone - RHB Invest 2020-11-10: Solid 3Q20 Financial Performance; Stay BUY


Riverstone - Solid 3Q20 Financial Performance; Stay BUY

  • Riverstone's 3Q20 financial performance met expectations. The company’s expansion plan is intact, with Phase 6 to add 17% capacity by year’s end.
  • Keep BUY on Riverstone and DCF-derived S$2.73 target price, 39% upside with c.5% FY21F yield. Our target price, which implies 12.7x FY21F P/E, is close to Riverstone’s 13.4x average P/E and at a 15% discount to the sector average. The discount reflects its smaller market cap and lower liquidity.

Riverstone's 3Q20 earnings met expectations.

  • Riverstone (SGX:AP4)'s 3Q20 core net profit of MYR179m met expectations. Added to 1H20’s core earnings of MYR137m, Riverstone's 9M20 bottomline makes up 65% and 67% of our and consensus’s full-year estimate.
  • Y-o-y, 3Q20 revenue grew 92% to MYR482m on higher ASPs and better sales volumes. In line with the better revenue, gross margin improved to 52.2% (3Q19: 20.5%).
  • All in, Riverstone's 3Q20 core earnings improved 402% y-o-y.

Riverstone's bonus issue completed.

  • On 9 Nov, Riverstone’s stock went ex for its 1-for-1 bonus issue. Post bonus issue, the number of shares stands at 1.48bn. We have adjusted our target price to S$2.73 to reflect this bonus issue. See Riverstone's corporate action history.

Expansion plan intact.

  • Riverstone is on track to complete its Phase 6 in 2020. Recall that Phase 6 capacity is 1.5bn pieces pa (ppa). Upon completion, Riverstone’s capacity will increase 17% to 10.5bn ppa. For Phase 6, five out of seven lines have been commissioned and are now operational.

Cleanroom own brand manufacturing (OBM) products received better demand.

  • The cleanroom gloves segment also experienced demand growth from technology and manufacturing industries such as lenses, batteries, and semiconductors. Note that Riverstone’s cleanroom gloves segment is operating under the OBM business model. Products from its cleanroom division are sold under the RS Riverstone Resources brand for use in cleanroom environments.

Maintain BUY on Riverstone with S$2.73 target price.


  • The biggest risk is a faster-than-expected safe and effective COVID-19 vaccine being available globally. Although Pfizer and BioNTech SE have announced their mRNA-based vaccine candidate has demonstrated evidence of efficacy against COVID-19, do note that this is the first interim efficacy analysis and not the final one.
  • Additionally, by using the influenza A virus subtype H1N1 (H1N1) pandemic as example, after it ended in 2009-2010, gloves demand only dropped slightly in 2011 – down 1.3% y-o-y or 2bn to 148bn ppa.
  • Other risks: Lower-than-expected sales volume/USD and higher-than-expected raw material prices.

Singapore Research RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-11-10
SGX Stock Analyst Report BUY MAINTAIN BUY 2.73 SAME 2.73